Customer DisputesThe Top 10 Chargeback Triggers & How to Resolve Them

The Problem

Obviously, any business run by human beings is going to make the occasional error. If a customer orders something with you that takes an unreasonable amount of time to arrive (typically, anything outside of 10 days needs to be explained in your terms of service), they may file a dispute saying they never received the item. This is true even if it eventually arrives.

The Fix

Optimizing your fulfillment and shipping practices is a great workaround for this issue. Never be mysterious or vague about your fulfillment and shipping policies and practices. Explain every detail of your process, from packaging to estimated shipping times, and leave nothing to the imagination.

Another tip here: don’t wait around to ship packages either. As we are all aware, no merchant has control over shipping delays at the post office. Still, holding up your end of the bargain is a good plan, as it minimizes the risk of delays.

The Problem

When a customer receives a product that arrived damaged or missing something they believed would be included, they will often turn to their bank. As a merchant, you’d naturally assume that the buyer would use the proper customer service channels to fix the problem. In reality, though: consumers often turn to the customer dispute process because they think it will be faster or easier.

The Fix

Unless the customer’s claim is entirely bogus (and you can prove it), odds are you slipped up somewhere in your product descriptions, or your supplier isn’t a reliable vendor. Either way, the customer is relying on you to sell them what they selected and paid for, and if that item doesn’t match its description, you will run into problems.

You can avoid this issue by carefully packing all goods. Don’t hide flaws; if the item is already used, scuffed, or broken, make sure the customer knows this beforehand. Aside from this, you should be very careful about who you trust to fulfill your shipments. When in doubt, ask for sample shipments before you list any third-party products.

The Problem

This is a pretty common mistake for merchants who manually key in their orders. For example, if you or your staff are in the middle of a rush, it can be very difficult to make sure you’re entering every order into your system correctly. It’s easy to see how a quick slip of the finger might lead to a customer dispute.

The Fix

For brick-and-mortar shops, it is a good idea to move to a “scan-only” POS terminal. There are many inexpensive cloud-based POS systems to choose from. Many even offer features like contactless payments and QR code payments.

For online stores, make sure that you use a reliable online payment processing portal, like Stripe or WooCoomerce. Anything you can do to automate your order entry process will help prevent disputed charges.

The Problem

This is outright criminal fraud. The cardholder is largely protected from the impact of fraud by the customer dispute process…but you won’t be.

You could be on the hook for any transactions you process that result from fraud. After the transaction goes through, there’s nothing you can really do, so the best you can hope for here is to avoid the situation in the first place.

The Fix

There is a wide variety of fraud tools available to help you weed out potential fraud attacks. Address Verification Service (AVS), CVV, and 3DS technology are just a few examples.

However, these tools alone won’t protect your business. They need to be deployed in an intelligent, coordinated manner. Thus, it’s best to prepare a multi-layered strategy to mitigate fraud (more on this further down).

The Problem

This refers to a situation in which a cardholder makes a purchase, regrets it later, then files a customer dispute to recoup their money. This constitutes a case of friendly fraud; a situation where a customer side-steps your return policy in order to gain an illegitimate refund. A customer may do this when they know they don’t have a good excuse and are worried that their return request may be denied.

The Fix

There really isn’t much you can do to prevent this one. Your best hope is to fight back whenever you recognize that this is what happened.

The best thing you can do here is to list your items as accurately as possible. Include high-res pictures, as well as detailed measurements and materials in the product description. If you can prove that the description matches the item shipped, the bank will be more inclined to reject the customer’s claim and return your funds.

The Problem

This is a practice called family fraud. Many consumers fail to understand that this is another form of friendly fraud.

It’s often an innocent mistake. For example, a child of the cardholder makes an in-app purchase, then when the charge appears on their statement, the cardholder believes it’s invalid. Banks and payment processors don’t recognize these purchases as unauthorized, but the buyer may not be aware of this rule at all.

The Fix

If you can prove that the item was purchased by someone within the cardholder’s family (using IP address or geolocation data, for instance), the bank will probably reverse the chargeback.

Another tactic to consider here is to encourage best practices for your consumer as well. Enabling two-factor authentication and parental controls at checkout for online orders, and validating receipts in-store, can go a long way toward mitigating these disputes.

The Problem

Affiliate marketing is a great way for you to promote your products. However, the traffic you sometimes receive through these channels can be fraudulent, or not what was promised to you in your service agreement.

There are several ways that scammers can leverage affiliate marketing to take advantage of you. Click spam, cookie stuffing, and URL hijacking are just a few examples.

The Fix

Vet your affiliates carefully to avoid affiliate traffic headaches. Communicate every aspect of your expectations and agreements, and enforce your terms of service defensively. Also, if your affiliate makes promises to buyers that you can’t keep, then you need to cut those bad actors out of your program.

The Problem

Subscription services are considered high-risk because the business model features a high number of disputed charges. The reasons for this vary. But, generally speaking, people either forget about the subscription, make a mistake, or just want out of the agreement.

The Fix

Remind your customers before conducting any recurring payments. You should include a cancellation link in your email, make contact information easy to find, and make it extremely easy to cancel the service as a rule. While you want to retain customers, you don’t want to do so at the cost of additional chargebacks.

The Problem

It’s not uncommon for buyers to complete a purchase, then later dispute the charge, claiming that the item they received didn’t match what was promised. It could be that the size or dimensions of the item were oversold on your site. Or, maybe that the colors don’t quite match what the buyer saw in the pictures.

The Fix

Again: take extra care with your product descriptions!

You need to optimize your interior fulfillment practices to ensure that you never ship the wrong items. Your product descriptions should be accurate and give a reasonable, realistic picture of what is going to arrive at your buyer’s door. Also, always provide shipping, tracking, and delivery notifications to your customers. Keep this information on file so that it can be referenced later if needed.

The Problem

Keep in mind: not all disputes result from errors or misunderstandings like those above.

Unfortunately, many disputes happen because consumers ignore return policies, refuse to wait for refunds, or simply want to get something for free. This is a practice known as “cyber shoplifting,” and it’s an increasingly common practice for cardholders. Buyers learn that they can abuse the customer dispute process by making a purchase, then simply disputing the transaction later.

The Fix

You only have two possible courses of action here: refund the transaction, hoping to avoid a chargeback, or engage in chargeback representment.

During representment, you will literally “re-present” the transaction to the bank in order to reverse the customer’s provisional refund and get your funds back. Representment is a very costly and time-consuming process, however. No merchant is guaranteed a win, even when they are in the right. In many cases, it’s helpful to seek professional advice to help optimize chargeback responses.